CPB sets aside 10 percent

Deal with OMB puts $44 million in reserve in case of sequestration

Published in Current, November 5, 2012

The looming political battle over federal spending — and the possibility of across-the-board budget cuts imposed through sequestration — has prompted CPB to alter distribution of Community Service Grants to stations.

The change, implemented after CPB execs negotiated an agreement with the White House Office of Management and Budget over possible sequestration of its $445 million appropriation, boosts the amount of money stations will receive in the first of two CSG checks to be issued by CPB for fiscal 2013. But the second batch of checks, to be issued in March, will be much smaller.

How much smaller depends on the outcome of the Nov. 6 general election and whether lawmakers and the Obama administration can work out a deal that would forestall some $1.2 trillion in automatic spending reductions required under the Budget Control Act of 2011. The law triggering sequestration imposes $110 billion in across-the-board cuts on both mandatory and discretionary government spending for fiscal 2013; it includes provisions that cap future spending.

To avoid sequestration, Congress may opt to reconstruct the federal budget, “resulting in more for some, less for others,” says SRG’s Tom Thomas. That’s when CPB’s appropriation could come into play. (Photo: Wikimedia Commons)

While President Obama has said sequestration won’t happen on his watch and members of Congress are working on plans to resolve or postpone it, the government — and the agencies and contractors that rely on federal dollars — are preparing for it.

In CPB’s case, preparation required negotiating with OMB to reserve $44.5 million — 10 percent of its 2013 appropriation — in its own accounts, instead of OMB withholding the amount until policymakers resolve the budget standoff, according to Michael Levy, CPB e.v.p., corporate and public affairs. In talks concluded last month, OMB agreed to provide CPB with its entire forward-funded appropriation on the condition that CPB withholds that amount from its grant programs and operational spending.

“After conversations with the OMB,” Levy said, “and given that we are committed to acting with the utmost fiscal prudence in how we handle these funds, we are setting that amount aside.”

CPB invested the funds in 90-day certificates of deposit, Levy said. Interest earned on those will be spent on radio and television programming, in accordance with statute, he said.

It’s unclear how long CPB will have to hold the money in reserve, according to Levy. Under sequestration provisions of the Budget Act, CPB’s funding would be cut by 8.2 percent. Lawmakers must strike a deal by Jan. 2 to prevent sequestration from taking effect.

To adjust its own grant programs for the worst-case scenario, CPB will distribute $262.8 million in CSGs for fiscal 2013, an amount that reflects the 10 percent sequestration reduction required by OMB. Since the grants will be less than anticipated, CPB will break from its traditional practice of dividing the grant payments into two equal sums. To cushion stations from an immediate funding cut, CPB will pay 70 percent of each station’s CSG in the first batch of checks, which are now being processed. However, the amounts distributed in March will be 30 percent of the total CSG. A deal resolving the federal budget crunch may be worked out by then.

The government is now operating on a continuing resolution through March 27.

The CPB Board approved the change to the CSG program. CPB’s management and directors are concerned for stations suffering “dramatic reductions” in state funding and diminished individual and corporate contributions, Levy said. CPB’s leaders reasoned that a significant drop in stations’ first CSG payment “would exacerbate the stress that stations are already under,” he said.

Beyond sequestration

Policymakers could resolve the stalemate over federal spending in a variety of ways, Levy said. Sequestration could be delayed or replaced by another deficit-reduction mechanism, or Congress could decide to rescind funds from accounts after completing FY13 appropriations.

“We’re aware of the fluid nature of the conversations occurring in Washington, both on the Hill and in the White House,” Levy said.

After Election Day, a lame-duck Congress will return to Washington. The results of the election will affect whether lawmakers put off sequestration, jump over the so-called “fiscal cliff” or work out a bipartisan agreement with the White House.

Patrick Butler, president of the Association of Public Television Stations advocacy organization, remains hopeful that the across-the-board cuts will be averted. Both President Obama and congressional Republicans want to prevent sequestration from taking effect, and “various bipartisan ‘gangs’ on Capitol Hill” are working on plans to do so, Butler wrote in an email to Current. One option would be simply to delay dealing with the issue for several months.

“I am hearing unanimous sentiment for avoiding sequestration somehow, as Capitol Hill is taking very seriously the warnings of a new recession if sequestration takes effect next year,” Butler said.

But avoiding sequestration isn’t the only challenge pubcasting faces in Washington, said Tom Thomas, co-director of public radio’s Station Resource Group. “The whole premise of sequestration is to impose uniform cuts on spending,” he said. “Everybody feels the pain. And nobody wants that.”

To avoid sequestration, Congress may choose to reconstruct the federal budget, “resulting in more for some, less for others,” Thomas said. That’s where pubcasting funds could come into play.

“And of course all this tumbles forward into deliberations over funding levels for the years that follow,” he said.

CPB and pubcasting stations have weathered rescissions in the past, but never a sequestration, according to Levy.

So let’s say a station’s grant was to be $108k, but that 8k was held back just in case sequestration goes through. The station would receive a first payment of 70k. Then if sequestration was avoided it’s second payment would be $38k, right? Is that how this works?